A brand new modern international airport is high on the wish list of Dominicans and subsequently high on the priority list of politicians. Most people who wish to have a new airport, envision that as soon as the airport is officially opened, sizeable airplanes from far away come in like flies to the syrup. Slow down! Let’s start at the beginning.
Nothing can be started, until the funding is secured. A fair estimate of the cost of such an airport is around 300 million US dollars. The cost could be somewhat lower or higher. There is more than just excavation, paving a runway and putting up a terminal. Where are you going to get that amount of money? Rest assured that there is no such a thing as generous angels or a free lunch. Wherever the money comes from or who makes it available, a return of investment is expected. If it was some type of loan, monthly installments need to be paid. And then of course there is the interest that needs to be paid.
Let’s do some calculating. 300,000,000 US$ over 20 yrs = 15,000,000 annually or divided by 12, 1,250,000 monthly that has to be paid back. Of course, you can make it more appealing by stretching it over 40 years and then it is still 625,000 dollar per month. Then of course there is interest that must be paid. Let take an unrealistic low interest rate of just 1%. That means in the first year, 3 million dollars in interest, which is 250,000 per month. Add that to the monthly installment and the amount will be 875,000 US$. How are you going to make those payments?
Passengers taxes? Okay, let’s estimate that your airport will handle 350,000 passengers and the passenger tax (facility tax or processing tax or whatever tax) is US$ 40 pp. That amounts to an annual revenue of 14 million US$ or 1.2 million per month. Great! But after loan payments and interest, only 325,000 is left and it isn’t profit. Operating an airport cost money (staff, utilities, maintenance). Let’s just say that it needs a staff of 70 persons (of course salaries vary) and take an average of US$ 3,000 pp per month which makes it 210,000 and still 115,000 left over. Now there are utility bills that need to be paid, cost for marketing, maintenance, etc.
Why is this calculation incorrect? Wait until the comments below this article are coming in. Many readers will point out what the flaws are. Yet, mind that this calculation is only food for thought and anyone can give it his or her own twist in a comment. For one, experts in aviation or financing may say that the estimated numbers are too optimistic.
How long will it take to build such an airport? Let’s just say two years. (When will the development start?) However, in those two years there will be no revenue, just bills that need to be paid. No passengers. Major airlines don’t just come on promises and they are no opportunists. They are risk adverse. They analyze the route potential and calculate before making any decision. Regional carriers will come anyway, you already have some. But for the larger international airways to come, it will take lead time. How long? Six to twelve months, provided that the island will attract enough potential passengers to guarantee an 85% plus passenger load.
If as indicated the project might start six months from now. The development and construction will take two years. The leadtime for the first major international airline to come is six months. That makes three years until the Dominican wish may be realized, if there are no hurdles or delays.
Cdr. Bud Slabbaert is the chairman and initiator of the annual Caribbean Aviation Meetup conferences. The international results and solution oriented event brings airlift stakeholders from both aviation and tourism industry, as well as government authorities together. Mr. Slabbaert’s background is accentuated by aviation business development, strategic communication, and journalism.
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